Critical Survey: KKR Real Estate Finance Trust (KREF) & Howard Hughes (HHC)

KKR Real Estate Finance Trust (NYSE: KREF) and Howard Hughes (NYSE:HHC) are both finance companies, but which is the better business? We will contrast the two companies based on the strength of their analyst recommendations, earnings, risk, valuation, profitability, institutional ownership and dividends.

Dividends

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KKR Real Estate Finance Trust pays an annual dividend of $1.60 per share and has a dividend yield of 8.0%. Howard Hughes does not pay a dividend. KKR Real Estate Finance Trust pays out 131.1% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Analyst Ratings

This is a summary of recent recommendations and price targets for KKR Real Estate Finance Trust and Howard Hughes, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
KKR Real Estate Finance Trust 1 2 2 0 2.20
Howard Hughes 0 1 1 0 2.50

KKR Real Estate Finance Trust currently has a consensus price target of $22.17, indicating a potential upside of 11.39%. Howard Hughes has a consensus price target of $145.00, indicating a potential upside of 6.30%. Given KKR Real Estate Finance Trust’s higher possible upside, equities research analysts plainly believe KKR Real Estate Finance Trust is more favorable than Howard Hughes.

Insider and Institutional Ownership

73.2% of KKR Real Estate Finance Trust shares are owned by institutional investors. Comparatively, 83.9% of Howard Hughes shares are owned by institutional investors. 20.7% of Howard Hughes shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock will outperform the market over the long term.

Profitability

This table compares KKR Real Estate Finance Trust and Howard Hughes’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
KKR Real Estate Finance Trust 71.04% 5.77% 0.80%
Howard Hughes 15.31% 2.52% 1.12%

Earnings and Valuation

This table compares KKR Real Estate Finance Trust and Howard Hughes’ gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
KKR Real Estate Finance Trust $83.14 million 12.73 $59.06 million $1.22 16.31
Howard Hughes $1.10 billion 5.37 $168.40 million $1.55 88.00

Howard Hughes has higher revenue and earnings than KKR Real Estate Finance Trust. KKR Real Estate Finance Trust is trading at a lower price-to-earnings ratio than Howard Hughes, indicating that it is currently the more affordable of the two stocks.

Summary

Howard Hughes beats KKR Real Estate Finance Trust on 9 of the 15 factors compared between the two stocks.

About KKR Real Estate Finance Trust

KKR Real Estate Finance Trust Inc is a real estate finance company that focuses primarily on originating and acquiring senior mortgage loans secured by commercial real estate assets (CRE). KKR manages investments across multiple asset classes, including private equity, real estate, energy, infrastructure, credit and hedge funds. The Company’s investment strategy is to originate or acquire senior mortgage loans collateralized by institutional-quality CRE assets. Its target assets also include mezzanine loans, preferred equity and other debt-oriented instruments. The Company’s investment objective is capital preservation and generating attractive risk-adjusted returns for its stockholders over the long term, primarily through dividends.

About Howard Hughes

The Howard Hughes Corporation owns, manages, and develops commercial, residential, and mixed-use real estate properties in the United States. It operates in three segments: Master Planned Communities, Operating Assets, and Strategic Developments. The Master Planned Communities segment develops and sells residential and commercial land. This segment sells residential land designated for detached and attached single family homes ranging from entry-level to luxury homes to home builders; and commercial land parcels designated for retail, office, hospitality, and high density residential projects, as well as services and other for-profit activities, and parcels designated for use by government, schools, and other not-for-profit entities. As of December 31, 2017, this segment had 11,031 remaining saleable acres of land. The Operating Assets segment owns 13 retail, 25 office, 6 multi-family, and 3 hospitality properties, as well as 10 other operating assets and investments primarily located in and around Columbia, Maryland; Honolulu, Hawaii; Las Vegas, Nevada; New York, New York; and The Woodlands, Texas. The Strategic Development segment comprises residential condominium and commercial property projects. The company was founded in 2010 and is headquartered in Dallas, Texas.

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